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Jenner & Block Achieves Landmark Settlement for 22,000 New York City Tenants

On June 6, 2012, in one of the firm’s most significant pro bono victories in recent years, a federal judge in New York approved a landmark settlement agreement between a class of 22,000 tenants and Pinnacle Group, one of New York City’s largest residential landlords. The settlement successfully capped a five-year legal battle in this important impact litigation.

Pinnacle owns many rent-controlled apartments in New York, which has a very complicated set of laws and rent-control regulations. The company, which denies all liability in connection with the settlement, was accused of orchestrating a campaign of harassment against its low-income tenants in an apparent effort to force them to move out so that new tenants – not under rent control – could move in, thereby making Pinnacle’s buildings more valuable.

After a 2006 New York Times article detailing a state attorney general’s investigation into Pinnacle’s actions, Betsy Gotbaum, the then-New York City public advocate, approached Jenner & Block to ask if the tenants had a cause of action that could be prosecuted civilly by a private law firm on a pro bono basis.

The firm and Partner Richard F. Levy answered the call. The result was a creative and aggressive civil RICO lawsuit filed in July 2007 in the U.S. District Court for the Southern District of New York, with pendent state law claims for violation of the New York City Consumer Protection Act.

After the district court denied the defendant’s motion to dismiss the RICO claims and certified an injunctive and liability class, Pinnacle sought to appeal the class certification to the Second Circuit. The day after the appeals court denied that motion, Pinnacle’s lawyers called the Firm to propose settlement talks.

However, the settlement discussions marked not the end of the story, but rather the start of a new and important chapter. The firm found itself at odds with its titular clients, the five named class representatives, and it soon became clear that settling the case in the best interests of the class as a whole and obtaining court approval of the settlement over their objections would be a daunting, costly, and labor-intensive task.

Mediating the dispute, U.S. Magistrate Judge Roland Ellis told the named representatives that the settlement, which included an independent and streamlined claims administration process and a $2.5 million fund established by Pinnacle to assist the tenants in asserting their rights, was “far better than anything that could be obtained in litigation.”

But the named plaintiffs would not agree, so the firm, having, as class counsel, the power and obligation to settle the case in the best interest of the class, signed a settlement agreement with Pinnacle, on behalf of the class, in August 2011.

The agreement prompted the expected objections and litigation leading to a fairness hearing and the attempted intervention of three lawyers claiming they could better represent the tenants’ best interests. While Judge Colleen McMahon rejected their claims, stating, “You have a law firm of national reputation, lawyers whose intelligence, diligence in connection with this lawsuit, and bona fides are not open to question,” she was not yet ready to approve the settlement. She ordered additional notice and briefing to give herself a basis to conclude that the settlement and its procedures comported fully with due process and other federal standards. As a result, the fairness hearing did not occur until April 12, 2012, and prompted yet further briefing.

Finally, on June 6, Judge McMahon issued her 56-page opinion approving the settlement, which included an agreement by Pinnacle to follow a series of “best practices” in their dealings with tenants. In her ruling, Judge McMahon noted that she was relying, in part, on Jenner & Block’s excellent representation of the class. She singled out Mr. Levy for high praise, specifically citing his “legal acumen and professional experience” as weighing in favor of approval.

“Whatever disagreements may exist,” Judge McMahon wrote, “the Court is completely assured of Class Counsel's competence, integrity, and good faith. The conduct of the litigation lay ultimately in Class Counsel's hands, and I am satisfied that he discharged his fiduciary duty to the best of his professional ability. Neither the Class nor the Court can demand more.”

The Pinnacle settlement is the type of pro bono victory not often seen in the legal profession. It is likely that the success of the RICO claims and the relief afforded the class may well have a positive effect on future relations between residential tenants and landlords in New York City. From a legal perspective, the case stands as an example of how tenacious and careful lawyers can obtain settlement relief for a class even under the most contentious of circumstances, including objections from the class representatives themselves.